AFRICA DAY5th World Water Forum

Financing a Sustainable Expansion of

Africa’s Water Infrastructure

Presentation by A. R. Rakotobe, Director

Water and Sanitation & African Water Facility Department, AfDB

Istanbul, 18th March 2009

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The Africa Water Vision (AWV) for 2025 Endorsed by African Ministers of Water Resources and other

stakeholders at the 2nd World Water Forum in May 2000

“An Africa where there is an equitable and sustainable use and management of water resources for poverty alleviation, socio-economic development, regional

cooperation, and the environment. ”

compare

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An update of the AWV financing requirements has been carried out. This is preliminary, indicative but realistic

The Update was made possible by recent processes focused on water, including:

•African Infrastructure Country Diagnostic (AIC)

•WHO’s publication on ‘Regional and Global Costs of Attaining the Water Supply and Sanitation Target (2008)

•WSP’s ongoing country-level diagnostics in water and sanitation

•ADB’s Clean Energy Investment Framework

•December 2008 Sirte meeting on Water for Agriculture and Energy in Africa, and

•OECD’s contribution on ‘Financing and pricing water’ at the December 2008 Global Forum on Sustainable Development

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Estimates of overall cost are now better linked to specific economic and social development outcomes

• Update allows estimation of the cost of water resources infrastructure to achieve economic growth, food and energy securities and hazard management

• Although some uncertainties remain, (especially in energy and water storage, with multipurpose opportunities), unit costs of new infrastructure are gaining greater realism

AWV 2025 Targets

•provision of safe and adequate water supply and sanitation for 95% of the population;

•doubling the irrigated area to 24 million ha; and

•developing 25 % of the hydropower needs

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The AWV established a financial requirement for water infrastructure of US$20 bn p.a. in 2000. A recent update puts the requirement at $50 bn

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42.1

0.4

12

5 5

20

5

0

5

10

15

20

25

WS&S Wastewater Agric water HEP Multi-purpose Storage

AWV US$ bn [2000]AWV US$ bn [2008]

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Increase due to infrastructure to achieve economic growth, food and energy securities, and hazard management

Drinking WSS

$12 billion p.a. linked to 3 main pathways to attaining MDG targets. 1. New, extended coverages necessary to attain the MDG targets. 2. Rehab & recurrent costs of existing coverages 3. Recurrent costs associated with maintaining new coverages

Water Agriculture and non HEP storageCombined investment costs for next 50 years is :

1.$5 billion p.a. for capital costs of irrigation and recurrent O&M costs

2.$10 billion p.a. (incl. non HEP multi-purpose storage) to bring per capita storage to acceptable levels

HEP Multipurpose storage

Tentative requirement for is in the region of $20 billion p.a.

Hydropower will become an increasing source of energy given trend towards cleaner energy and measures taken to address environmental and social concerns in large dam infrastructure

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Total gap is in the region of US$30.0 bn p.a. (60%) - differentiated between capital expenditure and recurrent costs

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INDICATIVE FINANCING GAP BREAKDOWN BETWEEN CAPEX AND O&M

Capital Exp O&M TOTAL

WSS 2.9 3.1 6.0

Wastewater 2.4 1.6 4.0

Agricultural Water

1.8 1.2 3.0

HEP M-P storage

7.2 4.8 12.0

Non HEP M-P storage

2.4 0.6 3.0

Desalination 0.4 0.2 0.6

Institutional 0.1 1.3 1.4

Total 17.2 12.8 30.0

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Closing the financing gap requires actions from Governments and National Stakeholders, Regional Bodies and Development Partners

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AMCOW to be strengthened in its leadership role to deliver on the Water Agenda

• Establishment of a mechanism to peer-review water security actions taken by members

• Organisation of an AMCOW Ministers/Ministers of Finance meeting around finance strategies, and returns to Government and society

• Establishment of a short-term African Water Finance Task Force to bring together the different emerging strands of financing and to report to 2nd African Water Week

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Closing gap requires Government and National Stakeholders actions

Finance strategies to meet capex and O&M requirements (3Ts – tariffs, taxes, transfers)

1. Utility reforms that reduce operational inefficiencies and cost recovery to meet at least O&M

2. Delivery on the eThekweni commitment on financing sanitation (0.5% of GDP)

3. Meeting agriculture investments under the Maputo public expenditure pledge (10% of GDP)

4. Strengthened partnership with Development Partners and greater engagement with Africa’s emerging partners

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Governments, RECs and RLBO should embark on the development of trans-boundary water infrastructure

• Implementation of regional trade in energy, creating markets for large water infrastructure beyond the capabilities of individual countries

• Promoting water transfers between water-endowed and less-endowed countries to support economic growth

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Development Partners’ contributions should maximise use of existing national and regional facilities

• Strengthen and scale up support for RWSSI and AWF rather than create new initiatives

• Meet pledges and commitments, with greater clarity on disbursement instruments and replenishment of existing funds and facilities

• An urgent implementation response to disbursement of 2008 ‘Food Price Crisis’ pledges

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AfDB and the AWF will support specific actions on delivery of the commitments made....including

1. Commissioning a Strategic and Operational study on the role of water in Africa’s economic development, returns to Government and society and Action Plan to develop the water infrastructure assets (2009/10);

2. Supporting a meeting of AMCOW Ministers and Ministers of Finance by end of 2009

3. Organisation of the 2nd RWSSI International Conference to review achievement and mobilise resources for 2nd and 3rd phase implementation;

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AfDB Actions ....(2)

4. Support countries to prepare Sector Investment Plans including finance strategies by developing and sharing framework and tools

5. Roll out implementation of Pan African M&E Framework that will track investment flows, among others

6. Implementation of the Bank’s plan to increase water storage by 1% p.a. up to 2013

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The concluding messages reinforce the central role of Governments in pulling financing actions together

• In-country implementation is central to deliver on the commitments

• Govt. leading actions to bring others into the investment/cost saving/cost recovery mix...not about new finance only – also opportunities on cost saving and efficiencies

• Progressing investment plans needs to be together with finance (and marketing) strategies

• Partners need to align to the Regional development agenda and make good of their commitments.

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Thank you for your attention!